Today we went from a SPX loss of 1.52% to a close in the green at +0.16%, an intraday move off the lows by +1.72%. The NASDAQ lost over 1.7% and rallied back to close green +.30% with a +1.9% rally off the intraday lows. The Russell 2000 lost -1.5% at the intraday lows and rallied back to a +.71% gain and a move off the lows today of +2.3% While the closing gains weren't huge (The Russell 2000 maybe being the exception), 3 of 4 of the major averages clawed their way back in to the green with the Dow-30 down by only -.07% and the intraday move in all of the averages was impressive considering most of it came starting at 2:15.
3C gave some good signals today, that's the reason I used the weakness to move forward with the plan I was considering yesterday to increase the spec. long positions to more of a hedge. The TNA position added today made over 6%, TYH made +4.11% today, ERX was up +5.65% and FAS +4.7% today.
The AAPL June $540 calls are up +107%, the new July AAPL $560 calls bought yesterday are up over +21% also some July 555 calls from yesterday are up +25% and yesterday's PCLN July $625 Calls up 29.70% in a day; ranking the options model portfolio #10 for the week of 2002 weekly portfolios. I don't even make these trades for rankings as if I had entered larger positions the rank would probably be closer to #1.
While I'm prepared for drawdown in the core short positions, every one of the 5 (remember I covered GOOG yesterday and glad I did as I would have had a smaller gain covering today) are in the green from +7% to +16% and are now pretty effectively hedged. Should things go according to plan, the leveraged longs and Calls will be sold at a large gain and I'll move back to adding long term short positions (no leverage) for what I believe will be a very sharp next leg down. That's the plan, we'll see if any fundamental economic events or news change that, but I feel better not only hedged, but with excellent probabilities in making gains on the upside rather than just waiting and I still have all of my core shorts. Of course there are a lot of ways you could hedge positions, with the time that I have available for these positions, this was a good option.
None of the profitable leveraged long ETFs today were entered by chasing them, most were picked up near the lows of the day, let the trade come to you. I can't help but think back to Sam's sentiment email update today...
"Judging of how bearish everyone is and I don't know if you recall I told you about co-workers buying apple at $600 and selling at a loss well they just told me they are short the market by ETF's..."
While it's way too early for a victory lap, it seems that chasing the market has once again proven to be a losing proposition. Furthermore today was ugly; judging by the model portfolio's weekly rank (in the top 0.5%) and the gains in the leveraged long ETFs along with Sam's update of traders shorting the market, I think it just goes to show that emotions are not helpful in trading. The positions entered today are certainly contrarian, but not for the sake of being contrarian; those positions were entered based on hard data, not contrarian psychology. Even if the market moves lower from here, those positions are all at minimal risk because of the entry. I know a lot of you are keeping trading journals which I think are invaluable tools for teaching yourself and finding your place in the market, for me the lesson pulled out of the pages of my journals was, "You need to be patient". When I was trading exclusively for a living I often felt pressure to "make" something happen. I entered trades too early, I exited them too early and knowing what I know today, I was lucky to survive the experience. I still need to work on patience and knowing when to be still in the market. While I think 3C gives us a great edge, I think the greatest edge all of us have over Wall Street is we can pick and chose our battles, we don't have to be in the market all of the time; think about that and use it to your advantage.
While I probably sound like a broken record right now, I think one of the most significant events this week was the GS short call which as you know I would say the call is useless at best and very dangerous on average. Papademos talking about preparations for a Greek / EU exit were the final straw considering G-Pap is Goldman alumni. This is also why I NEVER watch CNBC unless there's a news event like an F_O_M_C policy statement. Some of you have been around since before Wolf on Wall Street at Trade-Guild and some of you may remember my short call on oil after nearly 8 years of gains. We got the top of the oil move within about a week to 2 weeks. What I remember most clearly was Cramer on Mad Money telling his viewers to buy oil on the next negative EIA petroleum report, which he called a "Contrarian trade". Within a week of Cramer saying that, oil rolled over never to look back. I remember the strong 3C signals and remember thinking, "How can millions of viewers all doing the same thing possibly be considered contrarian?". I also remember thinking about Cramer's admission on the Street.com of how he manipulated the market as a fund manager, how he said it was fun and if you weren't willing to do it, you shouldn't be in the game. I thought about Cramer's own allegiances as a Goldman Sachs alumni and immediately thought, "This guy is a lot smarter than this, he must be helping his buddies at GS by providing GS demand to sell in to by way of his vast audience".
Like I said earlier today: even having a good edge and idea of where the market is going, no one ever said Wall Street would make it easy, but this is the market we have.
Today's charts coming next...
5 years ago
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